Having a well-developed estate plan is one of the best things someone can do to safeguard their property, give themselves and their family peace of mind and avoid the cost of probate. Despite the utility of getting one’s affairs in order, though, a surprising number of people with without a plan for their estate.
This is not necessarily their fault; the legal area of estate planning is complicated. Between parsing through forms of power of attorney and trying to understand types of trusts, it’s understandable that a person may shut down. A basic estate plan does not have to be complicated though, it just needs these 5 components.
Last will and testament
The last will and testament is what most people think of when someone mentions “a will”. It is a legal document that states who will receive the deceased’s property. Creating a will is fairly simple and inexpensive. Anything listed in a will is subject to probate, though, and anything of high value, such as property, may lead to expensive taxes and other costs.
Powers of attorney
Power of attorney is a document which allows a person to act on another’s behalf. Health care and durable powers of attorney are two forms of power of attorney that should be in anyone’s estate plan. If the grantor becomes incapacitated, then the individuals they granted power of attorney to would legally be able to make medical and financial decisions on their behalf.
When a person is medically incapacitated, a living will gives clear instructions regarding their end-of-life care options. Drafting a living will and designating a health care power of attorney go hand-in-hand.
Many people have life insurance policies, 401(k) accounts, mutual funds, stocks and monetary accounts. Naming a beneficiary will ensure that they receive what’s theirs quickly and that the assets avoid probate.
Property held in a trust is exempt from probate. A person would want to avoid probate for several reasons; it is slow, costly, on public record and probate assets may be seized if the deceased’s debts are more than their estate value. Putting high value assets like real estate, homes or vehicles in a trust nips these problems in the bud.
These five simple elements will provide an excellent groundwork toward getting one’s affairs in order. The drafting process can take as little as one week and is relatively inexpensive. Not to mention that there is no better way to safeguard one’s assets and provide loved ones with peace of mind.